The Association of International Petroleum Lawyers (AIPN) has released the 2012 version of the Model International Joint Operating Agreement (the “2012 JOA”). First published in 1990, the model contract has become one of the most widely used in the international upstream oil and gas industry. Work began on the 2012 JOA in 2008, overseen by a drafting committee of 180 industry representatives from five continents.
The 2012 JOA includes a number of alternative provisions, allowing parties to modify the standard contract to better fit their particular circumstances. Additionally, the accompanying notes published by AIPN include guidance on the use of the 2012 JOA in civil jurisdictions.
The 2012 JOA incorporates several changes to the 2002 version, including the following:
- Bribery and corruption
Since the 2002 JOA was released, legislation has been passed in a number of jurisdictions in order to tackle corruption, including the Bribery Act 2010 in the United Kingdom. Whilst the 2002 JOA contained basic provisions in respect of bribery and corruption, the 2012 JOA has revised these provisions to better reflect the development of the law in this area. The warranties contained in the 2002 JOA have been expanded, and new requirements imposed, such as an obligation to notify the other parties of an investigation relating to a violation of anti-bribery laws.
- Health and Safety
Under the 2012 JOA, operators will be required to prepare and establish a Health and Safety Plan to achieve safe and reliable conduct of operations. The operator must carry out the plan in conformance with the relevant laws, and in a manner consistent with the standards and procedures generally followed in the international petroleum industry. The operating committee must revise the HSE Plan annually.
The provisions in respect of decommissioning have been expanded on, with new detailed provisions contained in Exhibit E of the 2012 JOA. Under Exhibit E, operators must prepare a Decommissioning Work Program and Budget. Additionally, the 2012 JOA provides for the creation of a Decommissioning Trust Fund, to which parties must contribute.
In the event of a protracted default, the non-defaulting parties may now avail themselves of a new “withering” remedy, in addition to the remedies contained in the 2002 JOA. Under the withering provisions, the non-defaulting party shall have the option to require the party in default to offer to assign a part of the defaulting party’s participating interest in the corresponding exploitation area.
- Assignment of operatorship
The operator is now entitled to assign its operatorship to an affiliate, subject to any necessary consent of the relevant Government, and provided that the assignee has the technical and financial resources to perform the duties of operator.
- Work program and budget
The 2012 JOA is more prescriptive in its requirements for a work program and budget than the 2002 JOA. Several optional provisions are included, and parties should be careful to modify the 2012 JOA to reflect their particular requirements.
It should be noted that there have been no material changes to the provisions relating to limitation of liability of the operator, an issue which has attracted attention following the Deepwater Horizon and Montara oil spills.